Lead Negotiator on Greek-Debt Deal Is Optimistic

Wall Street Journal
February 25, 2012

A lead negotiator for a historic Greek-debt deal is optimistic that a voluntary swap of more than €200 billion ($270 billion) in government bonds will succeed as investors will seek to avoid destabilizing the global financial system.

"Destabilizing the euro zone and potentially destabilizing the global markets would not likely be in the interest of too many investors," Charles Dallara, head of the Institute of International Finance, said in an interview Friday. The IIF is an industry group representing more than 450 financial institutions.

Mr. Dallara, the chief negotiator on behalf of the majority of Greece's private-sector creditors, said the alternative to a voluntary Greek-debt restructuring would "damage the European Central Bank's balance sheet," pointing to both the ECB's €45 billion in direct Greek-government bondholdings, and the Greek bonds it holds as collateral.

He said it would also potentially create "unmanageable strains" in the euro zone, spark broader contagion into Italy, Spain, Portugal and Ireland, as well as other countries, and fuel an "explosion of unrest in Greece."

More